The early 1970s breakdown of the Bretton Woods system of fixed exchange rates marked the last momentous change in the evolution of the international monetary system, producing the heterogeneous array of exchange rate arrangements that now operates. Yet, equally important in the development of global finance has been the massive growth in the volume of international capital flows since then. This growth is mostly due to the dismantling of the broad range of exchange controls previously put in

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... ce to facilitate exchange rate management by central banks under the surveillance of the International Monetary Fund (IMF). Though exchange controls have been progressively dismantled since the early 1970s, their removal in emerging economies was accelerated significantly in the early 1990s, according to an index of capital controls devised by the IMF.1 Institutional investors in advanced economies increasingly became more aware of opportunities to diversify portfolios through the 1990s and more internationalized banks were readier to lend in emerging markets.2 By the mid-1990s, emerging economies were absorbing 40% of global foreign direct investment compared with 15% in 1990 and received 30% of global portfolio equity flows, as against only 2% at the beginning of the decade.3 The presumption that international merchandise trade was to be encouraged after the war through a supranational institution like the General